Dr. Melissa Sherman joined MOBILion, a life science tools company that makes analytical instruments, after having been its investor at IP Group. And though she brought 25-years of experience working with some very large companies to the position, she didn't know much about fundraising.
"I had to learn it," Sherman, the company's CEO, says. "It was different when I was with IP Group and I was making investment decisions — what were we going to invest in? So, I at least had the lens of teams that would pitch to me or present to me, what went well and what didn't go well, and what we as IP Group were looking for an investment thesis. That certainly helped when I think about when I was going out with MOBILion to raise money — just thinking about what is the investment thesis of the investors that I'm pitching to and making sure that it's a right fit and making sure that that match is right."
Still, seeing it and experiencing it are two very different things.
"Nothing really prepares you until you're in the trenches and doing it," she says.
For example, when she was making investment decisions with IP Group, it was part of the culture to give the team seeking funding feedback if she chose not to invest on why she was not proceeding with the investment. That wasn't the case when she began raising funds.
"And I think that was the biggest culture shock for me as I was going out and raising money, that didn't happen," she says.
The beginning rounds are already particularly difficult, she says, so not understanding why an investor decided to pass didn't bring any clarity to the process. Still, Sherman found success as a fundraiser, bringing more than $110 million into the business. That's helped her learn a lot about the process.
"You just learn over time what's resonating and what's not resonating, and you change the pitch accordingly," she says. "Obviously, the earlier you are the harder it is because there's just significantly more risk in the earlier rounds. It became easier over time, too, because investors will watch you. They may not invest in the A, but they'll watch. And keeping those relationships warm so that they can actually see that you do execute, and you do follow through on your commitments. That brings more people to the table at the B round and the C round because they've watched your execution track record. And so even if an investor says no in the A, it's keeping that relationship warm for future rounds."
Something else she learned, particularly in the early stages, is sometimes a company can be too desperate to get the money, move on and run the business. But, she says, it's important to be selective when it comes to the investors you work with.
"Not all money is created equally," Sherman says. "When you get the investors, these are investors that are either going to have board seats or that you're going to be communicating with throughout the lifecycle of the business. You want those investors to have the right experience, the right mindset to be value-adding, to be open to dealing with challenges because not everything is going to go perfect every day in the business. You need investors that have that appetite and have that experience to know that not every day and quarter is going to be rosy, and they've got to be able to stick with you and support you and give you guidance and give you advice throughout the lifecycle of the company. If you don't have the right investors that have the right experience, it can be a devastating outcome."
Sherman spoke on the Smart Business Dealmakers Podcast about growing MOBILion, and how she's adapted to the fundraising process. Hit play to catch the full conversation.
